Why Michael Harte is worth $4.2 million

opinion I almost spilled my coffee all over my desk last week when I read the Commonwealth Bank’s annual report and discovered that its chief information officer Michael Harte had picked up no less than $4.2 million in remuneration over the 2010 financial year — a $1.4 million pay rise.

My first reaction was to call Harte and ask for an indefinite $50k loan for a trip to Miami so the Delimiter staff can lie on the beach interview so that I could ask him to justify how any one CIO could be worth $4.3 million in a year — the whole idea seemed preposterous to me.

The pay packet increase is particularly startling if you realise that it constitutes a rise of about $1.4 million — in 2009 Harte picked up the still amazing sum of $2.7 million. The difference in 2010 was mainly due to long-term incentive payments.

To most workers in Australia’s IT industry, Harte’s astronomical salary must seem remarkable. After all, entry level graduate IT salaries typically start around the $50k to $60k mark, and only gradually go up into the hundreds of thousands after you become a senior manager. The situation in the public sector is even worse — it’s not uncommon for a departmental CIO to earn less than $200k.

Of course, you can earn a lot more working for one of the big technology vendors, but Harte doesn’t — he’s an IT buyer, not an IT seller.

But the truth is that increasingly Australia’s private sector will be seeing more examples of highly paid chief information officers like Harte — and there’s a good reason why.

When Harte joined the Commonwealth Bank in 2006, his title was chief information officer, and he was in charge, of — well, d’uh — the bank’s technology support division. But since that time the high-flying executive’s role has changed substantially.

In October 2008 the bank went through a substantial reorganisation that saw a new division created — Enterprise Services — which Harte was appointed to lead, while maintaining his existing CIO title. Quoting from Harte’s CBA biography:

The Group formed Enterprise Services in October 2008 to enable an end-to-end service and process focus as well as accelerate the delivery of innovative customer solutions.

What this really means, when it boils down to it, is that Harte is no longer really just a chief information officer or technology executive — or, looking at it the other way around — that the CIO role in large Australian organisations is increasingly changing away from just being focused on IT.

You can see a similar trend in other large local organisations.

At ANZ Bank, for example, although the bank appointed a new CIO (Anne Weatherston) this year, it’s clear that ultimate responsibility for the bank’s IT systems rests with David Cartwright, the bank’s chief operating officer — including, for example, the bank’s offshore facility in Bangalore, India. Any major technology project is likely to involve Cartwright’s signoff.

NAB chief information officer Adam Bennett likewise has a higher master — Gavin Slater, the bank’s chief executive of Group Business Services, who also lists technology among his responsibilities.

Bob McKinnon is lucky enough to run his own shop as Westpac group executive of Technology. But Qantas’ IT function has been for the past several years been led, by group executive of Corporate Services and Technology David Hall, with other executives such as head of technology Segar Reddy taking a low profile.

Harte, McKinnon and co are paid millions of dollars each year not because they run IT infrastructure and make technology strategy decisions. The truth is the modern CIO role is evolving to become more akin to the head of operations in many organisations — with broad responsibility for ensuring that all aspects of a company’s systems meet operational outcomes.

This reflects the fact that the entire day to day business of many corporations consists of technology-related transactions. In 2010, banks are essentially just huge batches of datacentre racks with a few branch offices and call centre staff for support. Their main business doesn’t rely on technology. It IS technology.

In this sort of environment, two types of top-level executives will win out. The first will be those — like Harte — who take the step up from their IT roles and increasingly handle operational responsibility for their organisations. This is why Harte is being paid so much — he’s no longer just an IT chief.

The second will be those — like Qantas’ Hall — who subsume IT into their operational mandate. This sort of executive represents a danger to the traditional CIO, because they have the potential to take away much of the responsibility and power of the CIO role — as Hall did at Qantas.

Canny senior IT managers in 2010 will see this shift coming and prepare for it. It’s time to diversify and prepare to take the step up that Harte did at the Commonwealth Bank. The alternative is to be eventually relegated to obscurity due to your lack of foresight and diversified skills.

2 COMMENTS

Pay packets at that level often have no measurable basis upon which to exist…. but wait it gets worse. The head football coach for Texas A&M (one of the US’s largest football colleges) has just signed a 5 year deal with the university for $44 million and if he is fired in that time he gets a $20 million sign off package. Now consider that the president of the university will be paid about $1.2million and the average faculty member will get about $600 000 over the equivalent period. Go figure?

Hmm. My gut agrees with you, but in practice it’s a free market — if you’re going to start restricting the amount of money people can be paid, you’re getting a little draconian. How much staff are paid is a key factor in how successful a business is. If a business owner makes a decision to pay staff astronomical sums (eg $44 million), then they need to be aware of the consequences. Ultimately the business may go broke, and someone may learn from that.

It’s harsh, but it’s capitalism. I don’t think governments need to go too far to monitor the excesses of capitalism — far better to make sure the poor — on the other end of the scale — are still provided for.

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